Sprint Post-SoftBank 4G Future Attracts Bulls, Bears

Analysts expect "messy" quarters ahead for Sprint Nextel (S) in the near term, but Japan-based SoftBank's investment in Sprint could limit the stock's volatility even as financial and subscriber losses drag on.

Sprint's stock is trading for roughly the same price, near 5.80, as when SoftBank announced in October that it would buy a 70% stake in Sprint for $20.1 billion. SoftBank will tender for $12 billion worth of shares from existing holders, about 55% of their shares, paying $7.30 per share.

Analysts say Sprint's stock is trading as a function of that tender offer, the $8 billion in new capital that SoftBank will add to Sprint and the estimated value of the "stub," or the 30% of shares that will still be publicly traded.

Sprint is the nation's No. 3 wireless phone company, behind Verizon Wireless and AT&T (T). It also trails both in 4G LTE coverage.

Besides getting regulator approval for SoftBank's investment, Sprint has many balls in the air. Investors must decide whether to wait and see how Sprint executes on its many pending issues or to buy now, betting that Sprint's stub will be a hot item if the company's turnaround gains traction.

Bulls say SoftBank founder Masayoshi Son could replicate his success in the U.S. after gaining share in Japan's wireless market vs. bigger rivals.

Macquarie Capital analyst Kevin Smithen rates Sprint a buy.

"Sprint still has margin upside to come," Smithen told IBD. "There's no other stock in the U.S. wireless telecom space with the same opportunity in margin expansion. They need to make 4G investments. LTE is going to be a big catalyst for them on a path to higher margins."

"It's not compelling to jump in at this point," he told IBD. "There's not a lot of visibility on the back half of 2013. We're in this kind of purgatory."

Like Smithen, Synesael says Sprint's 4G "Network Vision" ramp is key.

Sprint has fallen behind in building out a high-speed 4G LTE data network. Sprint will hike capital spending dramatically in 2013, to around $7 billion-$8 billion, analysts say. Some analysts suggest not buying the stock until the cash burn eases and LTE subscriber additions pick up.

Dish/Clearwire Clouds Picture

In December, Sprint agreed to buy all of Clearwire (CLWR), aiming to acquire more radio spectrum for 4G services. Clearwire shareholders, though, are mulling a counteroffer from Dish Network (DISH). If the Clearwire deal does go through, consolidating its money-losing results could hit Sprint's valuation.

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03/30/2015 07:14 PM ET

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